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UNIVERSITY OF THE AEGEAN DEPARTMENT OF SHIPPING, TRADE AND TRANSPORT

«ΤΟ SCRUB OR ΝΟΤ ΤΟ SCRUB: THE SHIP-OWNERS’ DILEMMA»

POST GRADUATE THESIS FOR MSc “SHIPPING, TRADE AND

TRANSPORT”.

GOURGIOTI ALEXANDRA

22/9/2018

CHIOS 2018

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«TO SCRUB OR NOT TO SCRUB: THE SHIP-OWNERS’ DILEMMA»

22/9/2018

Post Graduate Thesis for MSc

“Shipping, Trade and Transport”

School of Business

Author: Gourgioti Alexandra

Supervising professor: Ioannis N. Lagoudis

Director of studies: Seraphim Kapros

CHIOS

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Contents

List of Abbreviations ................................................................................ 4

Acknowledgements ................................................................................. 5

Abstract ................................................................................................... 5

List of figures ........................................................................................... 6

List of tables ............................................................................................. 7

1. Introduction ....................................................................................... 7

2. Literature review ............................................................................. 14

2.1 Exhaust Gas Cleaning Systems (EGCS) or Scrubbers ................... 16

2.1.1 Wet scrubbers ......................................................................... 17

2.1.2 Dry scrubbers .......................................................................... 23

2.1.3 Which scrubber: an overview .................................................. 24

2.1.4 Why use scrubbers .................................................................. 25

2.1.5 EGCS, maintenance and monitoring ...................................... 28

2.2 Alternative Fuels ........................................................................ 31

2.2.1 HFO, MGO and MDO .............................................................. 31

2.2.2 Liquefied Natural Gas (LNG) ................................................... 35

2.2.2.1 LNG and greenhouse gases ................................................. 35

2.2.2.2 LNG advantages and disadvantages .................................... 37

2.2.2.3 LNG in new buildings and existing vessels ........................... 39

2.2.3 Methanol ............................................................................... 41

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3. Methodology ................................................................................... 42

4. Results ............................................................................................. 45

5. Conclusion ....................................................................................... 50

Bibliography ........................................................................................... 53

List of Abbreviations

CO2 Carbon Dioxide

GHG Greenhouse Gas

EGCS Exhaust Gas Cleaning System

EGCSA Exhaust Gas Cleaning Systems Association

ECA Emission Control Area

EU European Union

HFO Heavy Fuel Oil

ICS International Chamber of Shipping

IFO Intermediate Fuel Oil

IMO International Maritime Organization

ISO International Organization for Standardization

LSHFO Low Sulfur Heavy Fuel Oil

LNG Liquefied Natural Gas

MARPOL International Convention of the Prevention of Pollution

from Ships

MDO Marine Diesel Oil

MED Marine Equipment Directive

MEPC Marine Environmental Protection Committee

MGO Marine Gas Oil

MT Metric tons

NOx Nitrogen Oxides

ODS Ozone depleting substances

OMM Onboard Monitoring Manual

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OPRC Oil Pollution Preparedness, Response and Co-operation

PAH Polycyclic Aromatic Hydrocarbons

PM Particulate Matter

SECP SOx Emissions Compliance Plan

SOLAS International Convention for the Safety at Sea

SOx Sulfur Oxides

ULSFO Ultra-Low Sulfur Fuel Oil Low

VOC Volatile organic compounds

Acknowledgements

First of all, I would like to thank my supervising professor Dr. Ioannis

Lagoudis for his support and help. Without him it would be impossible

for me to complete this thesis. His patience, his willingness to help me as

well as his instructions helped me to curry out my work and gave me the

opportunity to understand better the world of research.

I would like to thank my thesis committee members.

I would also like to thank my family for their support and help all this

time. They once again stood by my side through all this process and

helped me in every possible way.

Abstract

In this thesis the complexity of the factors related to IMO 2020 Sulphur

Cap compliance, is displayed. The most applicable means that can

contribute to the elimination of the pollutant factors are mentioned. The

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most promising one, the Exhaust Gas Cleaning System (EGCS) is

thoroughly examined. Furthermore, the most common alternative

bunker fuels are also inspected, as possible choices. Taking into

consideration that all stakeholders need to invest a significant amount of

money, this work tries to answer the sector’s constant question,

whether EGCS is the “solution to the pollution”. The economic aspect of

the issue is examined through the implementation of an economic

assessment scenario. The outcome is a series of useful deductions. The

most apparent result is that scrubbers are more suitable for bigger and

new vessels. Nevertheless, as an overall conclusion it becomes obvious

that there are many ways to eliminate harmful exhaust gases. More

integrated research must be carried out as soon as possible, so that all

members of the marine sector’s community, after taking into

consideration all factors involved, will select the most suitable means in

order to comply with international regulations.

List of figures

Figure 1. SOx global emission ................................................................... 9

Figure 2. MARPOL ANNEX VI fuel sulfur limits ........................................ 10

Figure 3. ECA world map ........................................................................ 10

Figure 4. CO2 emission in different transportation means .................... 11

Figure 5. NOx limit on new engines in Large Ocean Going Vessels ......... 12

Figure 6. Exhaust Gas Cleaning Systems classification ......................... 16

Figure 7. Wet scrubber .......................................................................... 18

Figure 8. Membrane scrubber ................................................................ 22

Figure 9. Dry scrubber ............................................................................ 23

Figure 10. Types of fuels used in maritime sector .................................. 31

Figure 11. Petroleum products made from a barrel crude oil ................ 32

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Figure 12. Average HFO and MGO Rotterdam spot prices in $ / bbl. ... 34

Figure 13. IMO agreement for reducing ships’ CO2 ................................ 36

Figure 14. LNG facilities in central and eastern Europe ....................... 38

Figure 15. Distribution of scrubber/LNG in different types of ships ....... 40

Figure 16. World Total Final Consumption by fuel................................ 41

Figure 17. 24-month fuel consumption in $ for a Handy tanker ............ 46

Figure 18. 24-month fuel consumption for an Aframax tanker .............. 47

Figure 19. 24-month fuel consumption in $ for a Panamax tanker ........ 47

Figure 20. 24-month fuel consumption in $ for a VLCC tanker ............... 48

Figure 21. 24-month fuel consumption in $ for a ULCC tanker ............... 49

Figure 22. Ship owner options for compliance to new regulations ........ 42

Figure 23. Percentage of LNG new build ships. ...................................... 43

List of tables

Table 1. Annual (280 sailing days) fuel consumption in $ for five

different types of tankers ...................................................................... 45

1. Introduction

Shipping is the most important means of transport, as the international

fleet is carrying annually almost 90% of the total merchandise volume

(UNCTAD 2011). Vessels rely on fossil fuel, and as a result they affect the

sensitive ecosystems as well as human health due to the exhaust gases

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that they discharge. The environmental impact of the sector depends on

many factors, like a ship’s engine type, route, age, cargo and operation

condition (Entec, 2005 a). The most effective way to reduce the adverse

effects of shipping industry’s activities is to control the fuels used by the

sector. The traditional sources of energy for vessels are diesel oil and

heavy fuel oil, whose combustion releases various gases as NOx and SOx

in the atmosphere. These fuels have worked competently during the

recent decades, particularly with regard to adaptability, performance

and safety. But in the last few years some issues have arisen due to fossil

fuel use. These issues include «the barriers of compliance with the new

emission regulations, the increase of the fuel cost…, and finally the

sustainability issue» (Seddiek and Elgohary, 2014).

As the world’s population is rapidly increasing, the need for

transportation is growing fast, too. But this urge for trade means more

harmful emissions. It is very probable that whatever is done on land in

the direction of the protection of the environment and public health

from emission reduction of land-based sources (like vehicles and

factories), is diminished by the rising ships’ air pollution (Yang et al.

2012).

In 2016 new requirements for sulfur limits in the marine industry were

adopted by the International Maritime Organization (IMO). Established

formally in 1948 at an international conference in Geneva, IMO is a

United Nations’ specialized agency whose mission is to regulate ships

engaged in international trade, promote maritime safety and protect the

environment.

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Figure 1. SOx global emission

Source: The Shipping Observer

The IMO’s MARPOL Annex VI “Prevention of Air Pollution from Ships”

was adopted in 1997 and came into force in 2005, after acquiring the

requisite number of signatories and tonnage. According to the

International Maritime Organization’s official statement “The

regulations for the Prevention of Air Pollution from Ships (Annex VI) seek

to control airborne emissions from ships (sulfur oxides, nitrogen oxides),

ozone depleting substances (ODS), volatile organic compounds (VOC)

and shipboard incineration and their contribution to local and global air

pollution, human health issues and environmental problems”. At the

beginning the sulfur cap was set at 4,5% , then, after January the 1st

2012, it was set at 3,5%.

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Figure 2. MARPOL ANNEX VI fuel sulfur limits Source: U.S. Energy Information Administration, based on MARPOL

In 1997 Emission Control Areas (ECAs) were established. They are sea

areas where more stringent limitations have been applied, regarding

SOx and PM emissions, extending 200 nautical miles from the coast. The

ECAs include Baltic Sea, North Sea, most of USA and Canadian coast

(North American ECA), Puerto Rico and the US Virgin Islands (US

Caribbean ECA).

Figure 3. ECA world map

Map By Thor Marine Trading

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Annex VI defines two sets of emission and fuel quality requirements: (1)

global requirements, and (2) more stringent requirements applicable to

ships in ECAs. So, the new limit outside the ECA areas was set at 0,5%

m/m whereas in the ECAs the limit is already 0,1% m/m. More

accurately, this measure has been implemented since the 1st of January

2015. Additionally, in July 2017 the MEPC-71 made it clear that the

shipping industry should comply with these regulations up until January

the 1st 2020.

Apart from the International Maritime Organization (IMO), the European

Union (EU), the US Environmental Protection Agency (EPA) and the

California Air Resources Board (CARB), even port administrations, have

introduced regulations in order to reduce the contribution of shipping to

global emissions. More precisely, the European Union has adopted a

series of strategies with a view to reducing the emissions that are being

released into the atmosphere by ships. In 2012 with Directive

2012/33/EU, European Union tried to comply fully with the regulations

that were adopted by IMO regarding the sulfur limits.

According to Haifeng Wang, James J. Corbett and James J. Winebrake

(2007) “ships release more sulfur emissions per tone-mile of cargo

shipped than other transportation modes, due largely to dirty fuel and

uncontrolled stacks”. It is also important to remember that 70% of ship

exhaust gases are emitted within a range of 400 Km from the shore.

:

Figure 4. CO2 emission by different means of transportation Source: Network for Transport and the Environment

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Exhaust gases contain mainly Nitrogen (N2), Water Vapor (H2O), Oxygen-

(O2), Carbon Dioxide (CO2), Hydrocarbons (HC), Particulate matter (PM),

Carbon Monoxide (CO), Nitrogen Oxides (NOx) and Sulphur Oxides (SOx).

Figure 5. NOx limit on new engines in Large Ocean-Going Vessels

Source: Diesel Technology Forum

This work searches the best possible answer to the fundamental

question that marine industry is facing, namely what method to choose

in order to comply with the new regulations as far as exhaust gases are

concerned, with focus on SOx emissions. This is an issue of paramount

significance, since it will affect not only the great majority of the 60.000

vessels of the world fleet but also a number of sensitive sectors that are

related to the marine industry. Changes will have an impact on the

global economy, the environment and also on human health. Hence a

vast number of scientists along with marine sector specialists are

painstakingly examining all aspects involved.

Using high resolution emissions inventories, integrated atmospheric

models and health risk functions Sofiev, Winebrake et al. (2018)

attempted an assessment of ship-related pollution impacts in 2020 with

and without the low sulfur cap. They found that “Cleaner marine fuels

will reduce ship-related premature mortality and morbidity by 34% and

54% respectively. Despite these reductions, low-sulfur marine fuels will

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still account for 250k deaths and 6,4M childhood asthma cases annually,

and more stringent standards beyond 2020 may provide additional

health benefits”.

The subject whose investigation should be of top priority is the

economic impingement of every possible alternative method that can be

applied. CAPEX and OPEX data are cross checked and different scenario

models are examined by the accounting departments of shipping

companies. At the same time, the bunkering sector has to cope with the

upcoming switchover from the “good old” HFO to new types of fuels,

whose future price can hardly be predicted. Great amounts of funds

have to be invested on new vessels or retrofitting infrastructure while

refineries have to make their own decisions regarding which technology

they should adopt.

Another significant aspect is time. It is estimated that only 1% of the

world fleet has already complied with the IMO’s 2020 regulations

(Grimmer, R. and Myers, M. 2018). Thus, shipyards will face great

numbers of new buildings or retrofits in the narrow time space left till

the 1st of January 2020. Given that ship-owners haven’t reached a

decision and bunkering industry is hesitant, the time frame is bound to

taper even more.

A key issue that should also be considered is that all alternative methods

or fuels have some disadvantages, often difficult to content with.

In addition to all aforementioned, the shipping sector stakeholders must

take into account possible future regulations that may create a stricter

frame for the maritime industry such as the expansion of ECA zones,

along with rules already agreed, as for example the IMO’s 2025 EEDI

Requirements.

This thesis is dealing with the economic perspective of a ship owner’s

decision making process. More specifically, it exhibits a certain path that

stakeholders can follow in their decision making process as far as

viability of scrubber installation is concerned. The methodology used

contains the execution of an assessment model with stress to EGCS

installation expenses refund, in comparison to alternative bunkering

fuels costs.

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The study is developed in five Chapters. The marine sector exhaust

gases, the basic grid of already implemented regulations, new

requirements and norms along with their amendments, are presented in

Introduction (Chapter 1). In Chapter 2 through Literature Review helps

us understand how science and research come to stakeholders’ aid by

providing new technical solutions, such as the Exhaust Gas Cleaning

Systems (EGCS) or alternative propulsion fuels, like MGO,MDO, LNG and

Methanol. Chapter 3 contains the Methodology used in this thesis, an

economic assessment scenario that is being implemented on specific

types of tankers with the installation of scrubbers taken into account. In

Chapter 4 the derived Results from the methodology applied, are

examined. In the 5th Chapter the key deductions of the work are

summarized and some general outcomes are being presented.

2. Literature review

A thorough examination of emission regulations as mentioned, shows

that the situation has already changed and many more developments

are yet to come in the near future. Globally, a vast number of private

sector researchers along with public institutes, are putting a great deal

of effort to track down the best way to achieve rule compliance.

Numerous publications, issued from institutes (ABS Advisory on EGCS,

2018; Germanischer Lloyd, 2013; IVL Swedish Environmental Research

Institute, 2016 ), as well as researchers of the private sector (Barsamian

and Curcio, 2017 ) along with an increasing number of thesis studies

(Duursema, 2015; Mansson, 2017; Sastre Buades, 2017; Serwah, 2016;

Kokkinos, 2018; Lahtinen, 2016) and articles, focus on the challenges

shipping industry is facing.

In their publication “Emissions Tradeoffs among alternative marine

fuels: Total fuel analysis of residual oil, MGO and MDO” (2008), James J.

Corbett and James J. Winebrake, through a total fuel cycle analysis,

estimate and compare emissions of CO2 and SOx for RO, MGO and MDO

fuels used in a certain type of ship (container). After the presentation of

the results derived by an analysis of three variables (i.e. sulfur content,

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energy content and fuel density), they demonstrate the need for the

refinery industry to adopt improvement measures in order to eliminate

vessels’ emissions.

In their study “Assessment of cost as a function of abatement options in

maritime ECAs” (2015), Haakon Lindstad, Inge Sandaas and Anders H.

Stromman make an assessment of costs and fuel consumption of two

types of ships operating in and out of ECA zones, taking into

consideration different sea and weather conditions and the area they

are traversing. An analysis of abatement options assessment is applied

regarding fuel consumption in ECAs.

Liping Jiang, Jacob Kronbak and Leise Pil Christensen, in their work “The

costs and benefits of sulfur reduction measures: Sulfur scrubbers versus

marine gas oil” (2014) are proposing an economic analysis of measures

for ships’ emissions and pollution reduction. The measures are

compared regarding their equivalent annual net benefits, using fuel cost

fluctuations and the ship’s age. They also apply a trip-based method for

estimating ships’ emissions under certain circumstances.

In their study “Adapting the shipping sector to stricter emissions

regulations: Fuel switching or installing a scrubber?”(2017) Luis Maria

Abadie, Nestor Goichoechea and Ibon Galarraga are featuring an

economic assessment of the alternative techniques, by adopting a

stochastic model for various fuel prices. Thanks to that method the

resulting estimations can help marine industry’s decision makers pick

the most feasible option for their vessels.

In this thesis, emphasis is given to the financial perspective of the

various alternative options. As already cited, the impact on all affected

sectors will be unprecedented. By adopting an economic assessment for

scrubber use but also different alternative fuels in a variety of ship types,

it becomes more obvious which method achieves the best return of

invested funds, a critical factor that all ship-owners take into account in

their decision making process.

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2.1 Exhaust Gas Cleaning Systems (EGCS) or Scrubbers

Figure 6. Exhaust Gas Cleaning Systems classification

Source: International Maritime Organization, 2016

Exhaust Gas Cleaning Systems are devices that are installed in the

exhaust system of ships in order to clean the gases released in the

atmosphere from marine diesel engines and oil-fired boilers. This way a

ship can discharge only a minimum amount of SΟx and reduced

particulate matter, as if it was burning fuel with a sulfur content less

than 0,1%.

Scrubbers achieve that by using either sea water, chemically treated

fresh water, or dry substances. After scrubbing, the clean exhaust gas is

released into the atmosphere. It is estimated that scrubbers remove up

to 98% SOx (Kristensen, 2012) and 40-75% PM. The substance used for

the cleaning process creates a waste stream which has to be processed

before discharged over board or stored.

As for discharged waste water, the European Union compels each

Member State to comply with the water quality standards that are

included in the Water Framework Directive (WFD). This particular

decision has led a number of state-members of the EU to ban the

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discharge of exhaust gas cleaning system’s wash water in their territorial

waters. For instance, Germany prohibits the discharge of wash water

that comes from a scrubber system in its inland waterways, its rivers and

some of its ports. Belgium went one step further, by forbidding the

discharge of scrubber’s waste water from the ships within three nautical

miles of its coast. Additionally, since 2015 IMO has put a specification of

certain criteria of the wash water discharge. More specifically, the wash

water pH must not exceed 6,5. Additionally, the MARPOL Annexes VI

Regulation 17 refers to the residues that can be found in the scrubber

system’s wash water. These residues must be carefully stored onboard

and be delivered to appropriate facilities on shore. The discharge of such

substances is prohibited under any circumstances. It is very important

for crew members to follow this procedure very carefully and record

every step of it in the EGCS’s log book, which should be kept onboard.

The European Union has made it mandatory for ships that want to install

an exhaust gas cleaning system (EGCS) and operating under the flag of

any Member State, to be certified by the MED which stands for Marine

Equipment Directive. At the same time, those EGCS must also meet the

standards of the IMO.

2.1.1 Wet scrubbers

The most common type of scrubbers is the wet-scrubber. The general

idea is to mix exhaust gas with water in order to remove sulfur, as SOx

gases are water soluble. After being liquefied, they form acids that react

with alkaline water: either natural sea water, or fresh water with added

substances. Thanks to this process, the once harmful SO2 ends up to

form sulfate salt, which occurs naturally in the sea and is soluble as well.

This process is not something new. The first scrubbers were used to

remove carbon dioxide from early submarines.

Wet scrubbers fall into, three categories: Open loop, closed loop and

hybrid scrubbers.

Open loop is the system that is being provided with seawater. It is the

high alkalinity of the seawater that neutralizes the SOx in the exhaust

gases.

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In wet open loop scrubbers the water is used only once and then, after

treatment, it is discharged overboard. It has the plus of working with

very few moving parts and requiring hydraulic pressure provided by a

pump. Though it requires regular de-fouling and operational checks, it is

a low maintenance system which consists of three different parts.

Figure 7. Wet scrubber

Source: Ionada.com

The first part is the exhaust gas cleaning unit that provides the suitable

vessel for the emmissions, that come from the boiler or the engine of

the ship, to be stored and cleaned by the water.

In this part of the wet scrubber’s system, the exhaust gases are being

cooled to 160-180 oC in an exhaust gas economizer. Then the gases are

treated in an ejector where water is ejected and soot particles are

removed. Finally the exhaust gases are being led through an absorption

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duct, sprayed with water and cleaned from remaining SOx. It is here that

the alkaline components in the seawater neutralize sulfuric acid.

The second part of the scrubber is a special wash water treatment plant

that brushes away the pollutants from the water. In the treatment

device the wash water is cleaned and residuals are removed by filters.

The last part of the whole process is the sludge storing facilities. Vessels

are not allowed to burn the residues onboard, so they are obliged to

reserve those pollutants until they find suitable disposal facilities ashore.

A monitor system that records air and water parameters is also required.

The open loop is the most economically attractive type of wet exhaust

gas cleaning system. It is also the simplest. Crews seem to prefer it too

and that is very important because they are the ones that handle it

onboard. When crew members are accustomed to a certain machine or

a specific mechanism, the error percentage can drop dramatically and so

do costs.

It must be stressed that the function of an open loop scrubber depends

on the chemical composition of the water in which the vessel is

operating. For example, an open loop scrubber system might face some

problems in certain areas where the salinity or the alkalinity of the water

is low. So it is very important for both the shipping company and the

designing team to take into consideration the area in which the vessel is

meant to operate. If the alkalinity of the water is lower than required,

then the scrubber system will not be able to function well and the

operator should switch to using low sulfur fuel oil in order to meet the

IMO’s requirements regarding sulfur emissions.

It is also important to emphasize the fact that shipping companies which

choose to install an exhaust gas cleaning system will have to constantly

monitor its performance. According to the revised EU sulfur directive

“ships using alternative emission abatement methods shall continuously

achieve reductions of SOx emissions that are equivalent to the

reductions that would be achieved by using compliant marine fuel”. So it

is obvious that the ship-owners who install exhaust gas cleaning systems

on their vessels should also equip them with a highly sophisticated

emissions monitoring system.

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In closed loop scrubbers on the other hand, the water, usually

freshwater with an additive that increases its alkalinity, is cleaned to

become suitable for recirculation and be reused in a continuous closed

loop, and not only once, as in open loop scrubbers. The additive needed

is usually aqueous sodium hydroxide, known as caustic soda (NaOH).

During treatment, residues are removed from the dirty washwater, and

the cleaned water is dosed with NaOH to restore its alkalinity, before

returning to the scrubber tower.

The use of closed loop systems is preferred under certain circumstances.

For example when the ship is in an area where the water discharge is

prohibited due to strict regulations, when the vessel is moored at a port,

or traveling in river estuaries were water alkalinity might be low. The

fact that the chemical composition of the water, in which a ship is

operating, does not affect the way the scrubber is operating, is an

advantage.

By ensuring high levels of alkalinity, owing to caustic soda injection, this

method uses half the wash water that would be needed in an open loop

scrubber and of course, at the same time, it achieves the same level of

efficiency. A closed loop system gives the operator the ability to

constantly control alkalinity levels, thus creating a stable environment

inside the scrubber system.

Nevertheless there are also some drawbacks regarding the closed loop

system’s function. Due to the continuous recirculation of the water

inside the system, monitoring its quality becomes more difficult, as the

water’s color is getting darker. Especially when it comes to the

measurement of the Polycyclic Aromatic Hydrocarbon (PAH) levels inside

the system, every mistake can cost thousands of dollars in fines for the

shipping company owning the vessel.

Closed loop systems are also more complex and more costly. It is also

possible that during their handling some problems may emerge. The

dangerous nature of the caustic soda makes the use of special acid-

resistant material imperative, especially in the parts of the scrubber

system that have a greater concentration of acids. A good example of

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such a material is the duplex stainless steel which is extremely corrosive-

resistant.

Ship crews must also be aware of safety procedures when handling this

corrosive substance which can harm unprotected eyes and tissue.

Because a buffer tank is needed (and this is probably the system’s major

drawback, since this wastewater storage tank requires space) as well as

a heat exchanger, pumps, strainers, a sodium hydroxide unit and a water

treatment device, closed loop systems are more costly to run.

Another type of wet scrubber is the hybrid type. This type allows

switching between open and closed loop systems, offering the

advantages of both. They operate as open loop when in the open ocean

and as closed when the vessel is sailing in protected areas or near the

coastline. The conversion from open loop to closed is done by changing

the circulation pump suction from seawater to the circulating tank and

by sending wash water to the circulation tank instead of the overboard

discharge.

This type of scrubber has also its disadvantages. For example, it is more

complicated when compared to the two other types of scrubbers. It also

requires more space on the ship than a wet or a dry scrubber system.

The required handling of the caustic soda (NaOH) and the residues,

generate higher operational expenditure.

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Figure 8. Membrane scrubber

Source: Ionada.com

Recently another type of wet scrubber called membrane scrubber

system, has been developed.

In this type of exhaust gas cleaning systems, the gases are being filtered

through a membrane which captures the SOx. There are many layers of

tube membranes that are made from ceramic material and contain a

special caustic solution that has the ability to absorb the SOx. The

membranes are located in the exhaust stream. The main requirement of

this system is the frequent replacement of the caustic solution that is

being stored in a tank. The advantage membrane scrubbers offer is the

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lack of wash water. On the other hand, this type of wet scrubber has a

higher cost for the shipping companies, as it uses caustic soda.

2.1.2 Dry scrubbers

Figure 9. Dry scrubber

Source: Ionada.com

The dry exhaust gas cleaning system’s concept is based on the use of a

chemical absorption called chemisorption that doesn’t use water or any

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liquid as a medium. Entering sidewise in the absorber through a filter or

bed of the absorbent, the exhaust gas streams are cleaned and then exit

from the other side. The residue, calcium sulfate, is then removed from

the bottom of the exhaust gas cleaning system and stored in the vessels’

ballast tanks in order to be disposed of as soon as the ship reaches a

port.

The absorbents are rather limited for the time being. The most widely

used is calcium hydroxide [Ca(OH)2] which must be stored onboard.

Since a larger surface of the substance is needed, calcium hydroxide is

supplied as granulate with a very high surface to mass ratio. Calcium

hydroxide reacts with the SOx to give solid calcium sulfate of gypsum

CaSO4.

Apart from the desulfurization agent the only thing needed is electrical

energy. In the end, up to 99% of the SOx can be removed as well as NOx

emissions. However dry scrubbers require significant onboard storage

for the reactants and the products of the process.

2.1.3 Which scrubber: an overview

Every system has its advantages, so shipping companies are employing

both types, wet and dry, trying to find out which suits them better, while

they still have some time, before the most stringent emissions standards

come fully into effect. Both systems have some common problems too,

like the weight of the equipment.

Recapitulating, it becomes obvious that open loop wet scrubbers are

comparatively simple systems with low operating costs because they

need less equipment and don’t involve the storage or handling of

hazardous chemicals. However they are suitable for vessels operating in

open sea, where the water is highly alkaline, and not in protected areas

where water discharge is not allowed. And there is always the possibility

that some day their use might be banned because what they do is

relieve the atmosphere from sulfur but burden the ocean with it.

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Closed loop scrubbers, on the other hand, operate in low alkalinity

water. Among their disadvantages is the complexity of their washwater

systems, the additional equipment and the space needed, the risky

handling of hazardous substances, (like NaOH).

Hybrid scrubbers are rather flexible and operate in all waters, regardless

their alkalinity but have not solved the problems such as the lack of

space, system’s complexity and NaOH handling. They are suitable for

operating in all kinds of waters, in open seas and near the coastline and

in operation restricted areas.

2.1.4 Why use scrubbers

One of the many advantages scrubbers offer over other options, is that

they give ship owners the ability to continue using the fuels that they

mainly use and therefore maintain their current practices in supply.

Hence it seems that retrofitting is feasible for many of the ships that

operate today. Naval architects can also design new ships having in mind

the possibility of installing a scrubber later.

Some experts (Jiang, Kronbak and Christensen, 2013) claim that, as far as

scrubbers are concerned, it is slightly preferable for a company to

choose a new build rather than a retrofit, assuming that the scrubber’s

lifespan when it is installed on a new vessel can reach up to 15 years,

whereas in a retrofit it drops to only 12 years. The retrofit is a non viable

solution when the ship is expected to operate for less than 12 years.

Figures are showing that most installations are taking place in shipyards

in Asia and that the 60% represents retrofitting scrubbers in older ships.

According to the Exhaust Gas Cleaning Systems Association (EGCSA), in

the second half of 2018 the overall number of vessels that were

equipped with such a system stood at 983. It is also worth mentioning

that this represents a 50% rise in the number of installations that took

place in just a few months.

Another interesting fact is that at present the companies of the bulk and

the container sector are the ones that prefer this kind of technology

while at the beginning it was the cruise sector that seemed to pave the

26

way. But, as already mentioned, every choice comes with a cost. And in

shipping, costs are usually extremely high. It is estimated that the

average cost for retrofitting a ship by adding a wet scrubber might be

40% higher than a new build (Entec, 2005). The amount of money that

such an installation may require varies from one million to even 5 million

euro per ship. The final cost may reach 8 million euro for some types of

ships. That’s the main reason that led to a huge gap between IMO’s

initial estimations (3.800 vessels) and the final number of ships on which

a scrubber system has been installed.

Another important factor is time, and time, especially in the shipping

industry is money. The installation of a scrubber itself may take up to

several weeks but the research sometimes may require a whole year of

preparations. And that’s because there are many different types of

scrubbers and a lot of different types of vessels. The only thing that is

sure is that companies don’t like taking vessels off hire for weeks.

After choosing the right scrubber system, a company must meticulously

search to find the optimum way to install it. There are many parameters

that should be taken into consideration. For example funnel and engine

casing modifications, additional piping system or tanks installation might

be necessary.

Shipping companies are also concerned about the possibility of a sudden

change in the international legislation that could easily make the use of

scrubbers quite defunct. And this danger might prove to be very real.

The implementation of all these measures is just at its beginning and as

a result there is a great chance that there will be many differentiations

on a legal level as the new rules are being enforced.

There is one more aspect that makes ship-owners skeptical about

installing scrubbers on their ships. Systems like these are space

consuming and that is something that may have an effect on the

capacity of the vessel. Except for the exhaust gas cleaning system itself,

extra space would be needed for the rest of the necessary equipment.

For instance, the installation of a scrubber system would definitely

create the need for a much larger funnel than the one that already exists

27

onboard. It will also require a totally different pump system, as well as

deck platforms and ladder.

The shipping companies must also take into consideration that the

installation of an exhaust gas cleaning system will increase the weight of

the vessel by several tons (Ara Barsamian and Lee Curcio, 2017). On a

ship with an engine power of 4 MW the overall weight of a scrubber can

be 4 tones, while on a vessel with a much stronger engine of 55 MW, the

total operational weight of the scrubber system can reach up to 53,7

tons. The effect that a heavy scrubber has on the stability of a vessel,

especially since scrubber towers are installed high above exhaust

chimneys (ABS, Exhaust Gas Scrubber Systems Advisory), should also be

considered.

Additionally, when a closed loop or a hybrid scrubber system is installed,

the ship will also need a fresh water circulation tank as well as NaOH

safety measures. The pumps are needed in order to give a specific

pressure for the spray nozzles and to take the water in the higher level

of the ship, where the scrubber is placed. All these new requirements for

the exhaust gas cleaning system might cause money loss or higher cost

for the shipping company.

Another possible obstacle regarding the use of a scrubber system is the

aforementioned discharge of the wash water. This process must be

monitored and that is the reason behind the need for data monitoring

devices onboard. According to the Guidelines that were set in 2015,

every exhaust gas cleaning system must include data monitoring devices

in its equipment. These are some of the data that IMO requires to

always be monitored: First of all, wash water is a crucial element of the

wet scrubber’s system. So it is imperative that its flow and pressure are

under constant control. It is also important to measure the pressure of

the exhaust gases inside the scrubber in order to avoid possible failure

of the system in the future. The exhaust gases temperature is also

another factor that must be taken into consideration. Of course, one of

the most significant things that should always be checked during the

EGCS operation process, is the SO2 and CO2 concentrations. Especially

28

the first one is the main variable that would determine the effectiveness

and the success of the EGCS.

As mentioned before, some of the wash water’s characteristics must

also be measured. One of them is the wash water’s pH and also it’s PAH

concentration levels. When the vessel is operating in areas with very

strict wash water discharge regulations there might be a need for

supplementary machinery to be installed. For instance, it would be

preferable to build in a separator that will guarantee the removal of the

extra amount of residues from wash water.

Additional logistics required by water treatment processes and sludge

management are another factor that has to be considered. Increasing

fuel consumption (estimated between 1 and 3%) and maintenance costs

are another drawback.

2.1.5 EGCS, maintenance and monitoring

On the bright side, according to many, an installed scrubber system is

not very demanding when it comes to maintenance, as it might have

been portrayed. But, naturally, it creates the need for an update in the

Plant Maintenance Scheme after the installation of such a system. The

pumping system as well as the pipelines must be inspected. It is

important that it operates properly on a daily basis. Only a few crew

members are needed for overseeing the scrubber, but they must be well

trained and should be able to operate it safely and know how to handle

the chemical substances and the waste water. The right maintenance of

this kind of system requires regular filter cleaning and an inspection of

the whole exhaust gas cleaning system to be executed every six months.

A record book providing the authorities with important information

about the scrubbers system’s condition and way of its maintenance is

also needed onboard. According to IMO’s guidelines “For ships

intending to use an EGCS in part or in full to comply with Regulation 14

of MARPOL Annex VI, a SOx Emissions Compliance Plan (SECP) must be

approved on behalf of the Administration and is required to detail the

method of compliance for all fuel oil combustion machinery installed

29

onboard”. It is more than obvious that the International Maritime

Organization with this declaration is trying to avoid the any uncertainty

that may occur in the future.

Another document that must be carried onboard is the Onboard

Monitoring Manual (OMM). It must have the approval of the ship’s flag

state. The OMM according to the principles that have been set by IMO,

should contain the following:

“Data on the sensors used in the EGCS emissions and wash water

monitoring system, including service, maintenance and calibration.

• The exact location where the exhaust and wash water measurements

are to be taken, together with any necessary supporting services or

systems

• Data from the analyzers that can be used in the emissions and wash

water systems, including operation, service and maintenance

requirements

• Other necessary information and data that will ensure that the

monitoring system is operating properly.

• Details on how the monitoring systems must be surveyed”.

An exhaust gas cleaning system has to pass two levels of approval. First

of all, the scrubber must have the official MARPOL authorization

regarding its environmental performance. Secondly, it should also have

the approval of the classification society. The IMO’s approval has two

options. The first one is the Scheme A. This option is providing the ships

with a pre-certified exhaust gas cleaning system. But this is not as easy

as it may sound, because there are many different factors that should be

taken into consideration before such a complicated system is being

approved. For instance, the monitoring process of the wash water

system is not fully covered by the certificate for air emissions that can be

provided by Scheme A. That is why the most preferable option for the

majority of shipping companies is Scheme B which guarantees the

monitoring system of the scrubber. The system’s supervisor must

constantly follow the international regulations in order to ensure that

the exhaust gas system is operating within the international regulatory

guidelines.

30

There is no clear answer and even the biggest companies of the sector

are very careful with their decision-making process. For example, the

extra cost for the containership industry can easily reach even 34 billion

dollars per year. Consequently, every factor must be examined and

weighted painstakingly. One critical aspect is the vessel’s age. If the ship

is old, for instance it is over 15 years old, the shipping company may

hesitate to install an exhaust gas cleaning system, although many factors

are showing that the cost of the installation can be recovered in a small

period of time that sometimes can be even less than a year. This will be

possible, as ships with a scrubber system installed on them, can freely

use the much cheaper Heavy Fuel Oil.

The new-buildings industry is very different. Ship-owners are more open

to the idea of ordering a ship with a scrubber system installed on it.

There is also one more factor that affects the decision making process.

An exhaust gas cleaning system being retrofitted on a vessel is a time

consuming procedure that may require many weeks, as already

mentioned. If the ship was already in use, the shipping company will lose

money. So it’s much easier and less expensive for the company to install

the system to a “newborn” ship.

Even the availability of space in a dry docking shipyard might be an

important problem as sometimes the ships that have scrubbers installed

on them at the same time are too many.

One more variable of this tricky equation is the economical state of each

company. The installation of a scrubber requires a respectable amount

of money that not every ship owner is ready to spend. Every ship owner

wishes that this sum will be paid off in a certain period of time thanks to

“savings on cash that would be generated from lower fuel prices” (Jiang,

Kronbank and Christensen, 2014). It is estimated that for a large vessel

with a fuel consumption that reaches 70 ton-per-day with an 6,5 million

euro installation cost, the estimated payback period is somewhere

between 18 to 14 months.

Some shipping companies are “going overboard” with scrubbers. But

others don’t. So, the latter, have to change the type of fuel that they are

31

using. The fuel market is already changing and this is just at the

beginning.

Figure 10. Types of fuels used in maritime sector

Source: ΙΜΟ

2.2 Alternative Fuels

2.2.1 HFO, MGO and MDO

Marine fuels are divided into two different categories. The first category

is the HFO (Heavy Fuel Oil) while the second one includes all the

distillate fuels, also known as MGO (Marine Gasoil) (James J. Corbett &

James J. Winebrake, 2012). Sometimes these two types of fuels are

combined and the mixture is a brand new category which is called MDO

(Marine Diesel Oil) or IFO (Intermediate Fuel Oil).

During the distillation process, different products, called distillates, are

being produced. The last are residual fuels used by ships, lubricating oils

etc. Some advanced refineries continue the process increasing the

temperature to 900 oC, giving valuable low molecular weight fuel oils.

The bigger the ship, the heavier the fuel its engines can use. That is why

HFO was the type of fuel that made the ships go round the world for

many years. Global demand for HFO (2016) accounted for 70% of a

mixed grade of bunker fuels.

32

Figure 11. Petroleum products deriving from a barrel crude oil

A residual fuel incurred during distillation, HFO is black in color, and has

a particularly high viscosity and density. Due to these characteristics, it

can’t be pumped in temperatures around 20 oC, so has to be preheated

in the ship’s tanks, at least to 40 oC.

Sulfur content is what differentiates HFO. High sulfur fuel oil (HSFO) has

the highest percentage of sulfur (up to 3,5%), low sulfur fuel oil (LSFO)

has a content of sulfur up to 1,0%, while ultra low sulfur fuel oil’s

(ULSFO) sulfur content reaches 0,1%. The latter is the fuel used in

protected areas.

The term MGO (Marine Gas Oil) describes those marine fuels that are

made solely from distillates. One of the main advantages of the distillate

33

fuels is that the percentage of sulfur in them can easily be kept under

very low levels, compliable with the 0,5% limit of the IMO’s regulation.

Actually, there is a certain type of low sulfur marine gas oil that contains

less than 0,1% sulfur. To be more accurate, a MGO fuel can contain

different degrees of sulfur, but always in lower concentrations than that

of the heavy fuel oil. Another very helpful quality of marine gas oil is

that, unlike the heavy fuel oil, there is no need for it to be heated while

in storage. Yet, a major drawback in MGO’s use is its high price. In April

2016 it was more than twice the HFO’s price (Marquard and Bahls AG).

As for MDO (Marine Diesel Oil), it describes all those types of fuels that

are a combination of marine gas oil and heavy fuel oil. Indeed, marine

diesel oil refers to those types of fuel blends that have a very slight

proportion of heavy fuel oil. Sometimes MDO is being used as a

synonymous to IFO or Intermediate Fuel Oil. But there is a difference

between those two types of fuel, as IFO contains a higher quantity of

heavy fuel oil than MDO. Actually in some cases IFO is included in the

heavy fuel oil category. Marine diesel fuels have a higher density than

regular diesel fuels. Just like MGO, there are different types of fuels that

derive from MDO with different sulfur content. For instance, IFO 180

and IFO 380 contain less than 3,5% of sulfur. These two types of fuel can

be also found with a less than 1% sulfur concentration that enables ships

to enter into the Emission Control Areas. Of the 50,6 million metric tons

(MT) of bunker fuel sold in the largest bunker market, the Port of

Singapore, 75% was IFO.

As 2020 gets closer, refineries are choosing to optimize the production

procedure by turning their backs to heavy fuel oil. This is a very positive

change that may signify a new era in the fuel industry. The higher

demand for MGO will result in higher prices that are expected to surpass

the price of HFO (Møllenbach et al., 2012), even skyrocket, according to

some estimations. It is not a secret that in many cases the fuel costs

must be covered by the charterers. So in the eyes of some shipping

companies the new boost in the fuel prices will be the charterer’s

problem. However, the final recipient of the cost is, obviously, the

consumer, as Wood McKenzie analysts predict.

34

Figure 12. Average HFO and MGO Rotterdam spot prices in $ / bbl.

Source: International Energy Agency, 2017

The need for cleaner fuels creates uncertainty to the shipping industry.

The most crucial problem in that case is the number of desulfurization

units that will be available. That is not as simple as it may sound. There

is no such thing as an agreement for the number of refineries that

should be ready to provide ships with compliant to the IMO’s new

standards fuels. Every refinery must evaluate its alternatives and then

make its own decision. So it comes as no surprise that there are

conflicting views regarding the fuel availability that will be achieved by

2020. According to a study conducted by an international energy

company and was submitted to IMO “the refining capacity will not be

sufficient in 2020, estimating that 60%-75% additional sulfur plant

capacity needs to be built by 2020, compared with planned projects”.

The whole refining sector will feel the pressure of the new wave of

demand. Things will be more difficult for smaller refineries that produce

HFO while bigger refineries will be able to produce large quantities of

high value low sulfur products.

This is going to be an unprecedented change in the marine fuel supply

market. According to IMO “We are looking at a virtually overnight shift

from 3,5% sulfur content to 0,5%. There is a risk that the change would

cause a period of severe product shortages and inflated prices”. At

35

present the shipping industry is consuming 3,2m barrels per day (bpd) of

HFO. For MGO the number drops to 800.000 bpd. According to

predictions, from 2020 there will be a reversion, with HFO consumption

dropping to 700.000 bpd and MGO consumption rising at 3,4m bpd.

No one expects that the global refining sector will be able to switch its

whole production overnight. On the contrary there is a great possibility

that the bunker market will need some time to find a new balance.

2.2.2 Liquefied Natural Gas (LNG)

One of the fuels that might help to reduce the problem of the air

pollution caused by ships is LNG. It combines the benefits of gasses while

at the same time it is easily transported like all liquids (Semolinos, Olsen

and Giacosa, 2013).

Liquefied natural gas (LNG) is natural gas that has been converted to

liquid when cooled down to below minus 162 oC at a relatively low

pressure. Thus, LNG can be easily stored or transported in special tanks

with very low storage pressure. Natural gas contains more than 98%

methane, it is odorless, non toxic, non corrosive. It evaporates quickly, it

leaves no residue, so no cleanup is needed for LNG spills in water or

land. It contains virtually no sulfur and no particulate matter, while its

combustion produces is significantly lower in NOx compared to heavy

marine fuel oil. And its price is relatively lower than that of high sulfur

marine fuel oil especially now that oil is no longer as abundant as it used

to be in the past.

2.2.2.1 LNG and greenhouse gases

Though the LNG is a much clearer option than other fossil fuels, the

overall CO2 emissions that are being released in the atmosphere are

reduced only about 20%. So the advantages that the LNG’s use is

offering regarding the overall reduction of the Greenhouse gases (GHG)

emissions are not as significant. Even worse, some studies estimate that

burning LNG will reduce the CO2 emissions only around 10%.

36

Figure 13. IMO agreement for reducing ships’ CO2

Source: International Chamber of Shipping

The new regulations aim to decrease the amount of CO2 that is being

emitted. As the amount of CO2 released in the atmosphere by

international shipping in 2012 reached 796 million tons [according to

Third IMO Greenhouse Gas Study (2014)] this decrease in the emission

of CO2, the principal GHG, is of paramount importance for reducing the

global warming. As stated in the same study NOx emissions reached 18,6

million tons and SOx reached 10,6 million tons during the same year.

Hence, marine transport accounts for 2,2%, 13% and 12% of global CO2,

NOx and SOx emissions respectively (CE Delft, Germanischer Lloyd,

Marintek, and Det Norske Veritas, 2006). In Chapter 4 of MARPOL Annex

VI which entered force in 2013, IMO sets strict regulations in order to

reduce CO2 emitted from vessels.

Operational measures adopted to regulate CO2 emission fall into two

categories: a) the Energy Efficiency Design Index (EEDI), for new ships,

which involves the development of more energy efficient engines, and b)

Ship Efficiency Management Plan (SEEMP), which affects all ships old

and new, which optimizes vessel operational efficiency by controlling

and monitoring their performance.

Though LNG can’t cut CO2 to the extent that is required by mandatory

rules already in force internationally, it remains the best available option

in order to reduce this kind of emissions. Already, in spite of the

37

increased demand for maritime transport, shipping industry managed to

lower its total CO2 emissions by over 10% between 2007-2012

[International Chamber of Shipping (ICS)]. According to IMO rules, ships

constructed from 2025 and on, must be 30% more efficient than ships of

2000s. Many of the vessels that are going to comprise the future fleet of

super efficient ships, will be using LNG as a fuel.

What must be kept in mind is that although in LNG’s case CO2 emissions

are lower than in traditional fuels, CH4 emissions are higher (Thomson et

al, 2015). And though this gas doesn’t linger in the atmosphere as

carbon dioxide, its effects are more devastating because it traps heat

more easily. Actually it is 84 times more harmful than CO2. Methane

escapes the propulsion system of LNG fueled ships when combustion is

incomplete or as a result of venting from pipes after the engine has

stopped. It then dissipates to the atmosphere more quickly than CO2.

Therefore it is evident that LNG can’t be considered as a panacea for

solving all emissions issues, particularly regarding the aforementioned

methane slip (Schinas and Buttler, 2016).

And there is always the possibility of the future imposition of new

requirements regarding some pollutants that are known but not yet

restricted, which LNG fueled ships might not address.

Trying to comply with recent restrictions, manufacturers are developing

several new technologies for LNG fueled ships. Among them is adopting

advanced software for the designing of vessel hulls, using lighter

materials in the building of ships and reducing operational vessel speed.

2.2.2.2 LNG advantages and disadvantages

Introduction of LNG as propulsion fuel for shipping entails some

technical and financial challenges. However, price is one of its strong

points as it is relatively low compared to low sulfur distillates, marine

diesel oil (MDO), marine gas oil (MGO), high sulfur marine fuel oils,

heavy fuel oil (HFO) and intermediate fuel oil (IFO)(Llorenc Sastre

Buades, 2017). This does apply for these past few years, but since

marine fuel prices tend to fluctuate due to external factors, it is difficult

to make trustworthy price forecasts. It also applies to some markets, like

38

Europe and the United States, where natural gas price is considerably

lower than high and low sulfur oils prices. On the other hand in Asia,

LNG is more costly than low sulfur oils.

Additionally, due to the special infrastructure needed for LNG handling,

storage and distribution, low natural gas prices do not always translate

into low LNG prices, as well. In any case, the use of LNG decreases other

costs, like: tax costs thanks to reduced emissions, the cost of engine

maintenance as gas combustion is much cleaner, the cost of fuel as LNG

fueled engines are more efficient, etc (Herdzic, 2002).

Furthermore LNG technology is known and well proven, something that

does not apply for other technologies, like scrubbers for example. Not

only is it long tested and tried, but LNG technology is already being

improved, so that current products are much more efficient and less

costly.

Figure 14. LNG facilities in central and eastern Europe

Source: Bilikom(2001)

The greatest impediment to LNG being adopted globally is bunkering

infrastructure and facilities. LNG has to be liquefied, stored and then

supplied to vessels. So, infrastructure facilities also require huge

investments due to the sophistication in their construction and their

39

obligation to meet safety standards. Because ship owners need to be

confident that LNG supplies will be available everywhere and at low

prices, a hypothetical lack of fuel at port can cause many problems. But

things are changing. For the time being Rotterdam is one of the ports

that are being more involved with LNG bunkering facilities. This also is

the case with other ports around the Baltic and North Sea. However, in

order LNG to become a competitive fuel, more medium and small scale

ports need to establish LNG filling stations (Gullberg and Gahnström,

2011). Recently it seems that Europe might be ready to help its main

ports to have LNG available for ships (European Commission, 2014,

Directive 2014/94/EU of the European Parliament and of the Council of

22 October 2014 on the deployment of alternative fuels infrastructure.

Official Journal of the European Union, OJ L 307/71 Brussels). In North

America many ports are already well equipped. Therefore it seems that

at least in the ECA areas of the Northern Hemisphere there will be

sufficient infrastructure to support adoption of LNG (Schinas and Buttler,

2016). In the rest of the world bunkering facilities are at an infant

structure and this is what will determine the viability of LNG as a marine

fuel.

2.2.2.3 LNG in new buildings and existing vessels

On February 2017 the LNG fueled ships in operation where 100, while on

May 2018 the number had risen to 122, with another 132 under

construction or on order. In gross tonnage terms the share of LNG

vessels delivered has grown from 1,4% in 2010 to 5,7% in 2017 (UNCTAD

2017). As for the cost, building a LNG fueled ship is comparable to

building a traditional diesel fuel-powered ship but the fuel cost to

operate the first is approximately half of what it would costs to operate

the latter. So fuel savings are huge.

LNG is not only a probable choice only for new buildings but for existing

vessels as well, although retrofitting of the latter would require a higher

investment, due to large scale modifications that would be required in

40

the engine quarters. As a result the cost for retrofitting an existing ship is

between 5 to 17 million euros, depending on the tank and engine size

(Ralli, 2015). More likely to adopt LNG as a fuel are also ships that spend

most of their time in ECA zones where regulations are strict, such as

ferries and tags. The same applies to vessels operating in areas where

LNG prices are lower and the suitable infrastructure guaranteed.

Figure 15. Distribution of scrubber/LNG in different types of ships

Source: 3d CWC LNG Fuels Summit 2017 (Amsterdam).

A problem that the wider use of LNG may create is the need for fuel

tanks on the ship. These tanks are cylindrical in shape, a fact that won’t

help with the existing space shortage problem on board. This fact

combined with some safety issues makes LNG tanks space consuming, as

sometimes they may require 3 or 4 times more space than traditional

fuel tanks. LNG engines are also occupying a greater percentage of the

ship’s space. Less space means less cargo and of course less cargo means

less money.

Furthermore LNG tanks have to keep natural gas under safe pressure

conditions. Safety has been a serious concern, though, for several

decades, LNG carriers using liquefied gas in their cargo tanks to power

their engines have an enviable safety record (Michot Fos, 2003).

41

2.2.3 Methanol

An alternative fuel that can be used by the shipping industry, which is

compliant with the new regulations regarding the sulfur content, is

methanol. The IMO has already given the green light to the ISO

(International Organization for Standardization) in order to promote this

type of fuel in the maritime sector. Methanol’s main advantages are its

high availability as well as the fact that it can be easily stored. It is also

easier and cheaper to retrofit an engine to operate with this particular

fuel. Especially on a new-built vessel the alterations needed are much

less when compared to the retrofits that will be required for instance at

an LNG fueled engine. As for the installation of a methanol fuel system in

an already existing and operating vessel it is calculated to be 75%

cheaper in comparison with the installation of an LNG fueled system.

The technical challenges that might also occur are not so many. For

example, it would be better if the pipeline system would be double-

walled and that the storage tank would have nitrogen inserted in it. By

doing so in case of an accident the methanol would vent with gravity

and become liquid when it comes in contact with air. This particular

property of methanol can make its removal from the fuel system and the

engine of the ship much easier when a repair is required.

Figure 16. World Total Final Consumption by fuel

Source: International Energy Agency, 2017

42

3. Methodology

Taking into consideration the aforementioned in Chapter 2, shipping

industry’s decision makers could end up with four major potential

solutions (Figure 22).

Figure 22. Ship owner’s options for compliance to new regulations

Source: IMO

ULSFO

ULSFO is unique as marine fuel and could not be surpassed by any other

fuel. Among its many virtues are compliance with IMO regulations and

low requirements regarding invested funds. The use of ULSFO is already

rising. In 2016 only it climbed to 2%. But the needed infrastructure is yet

not available. Another drawback is the high price at present combined

with future estimations that expect its price to rise even more. In fact, as

already mentioned, it is more suitable for older ships with a shorter life-

span which won’t be able to return funds invested in scrubbers or in LNG

engines.

43

EGCS

Scrubber appliances allow ships to use the cheap and abundant HFO. Investment and extra running costs, technical issues such as management of waste material or the ship’s stability along with lack of infrastructure in the future are serious obstacles. EGCS is a quite new, not tested technology and this can be another headache for the ship owners. Figures indicate that very few shipping companies have opted for scrubbers, postponing any system installation until 2020.

MGO

The MGO is another alternative for the ship owners. Low sulfur content ‒lower than IMO requirements‒ and a growing infrastructure network are its main advantages, while pricing could be a drawback.

LNG

LNG has a series of positive characteristics. Machinery efficiency, its low SOx, PM and NOx content, low price (in USA and Europe), lack of toxicity, are substantial benefits. Nevertheless, CH4 and CO2 emissions, space issues that will occur and safety problems have to be thoroughly analysed before any decision is made. Availability and high prices in some regions, like Asia, are also serious obstacles. Yet, LNG World Shipping data (as for May 2018) show that the number of liners that will use LNG has increased by 38% over the past year (Figure 18).

Figure 23. Percentage of LNG new build ships

Source: Titan LNG Analysis, Clarksons

44

As already mentioned, the economic aspect of the measures required

by IMO are of great importance, due to the significant amount of

investments needed. This will definitely affect the balance sheets of

most of the sector’s companies. The factor that might prove to be critical

for every investment carried out in the next few years, is the return rate

of invested capitals. This thesis displays viability of scrubbers in

corelation to other alternative fuels by using an economic model, taking

into consideration the Return of Investment Index (ROI). This can be

achieved by comparing consumptions of different fuels for a certain

period of time. First of all, a calculation of annual fuel costs for the four

most commonly used bunkering fuels, namely HFO, MGO, LNG and

ULSFO, is utilized on five different types of tankers. The types of tankers

chosen, typify the segregation of tanker fleet. Handy tankers are 10-

50,000 dwt, Panamax are up to 70,000 dwt, Aframax are up to 100,000

dwt, VLCC are up to 300,000 dwt and ULCC are over 300,000 dwt. A

sailing period of 280 days per year is taken into account. The cost of

scrubbers for every vessel type is also added in all HFO consumptions as

initial investment cost.

Data used in this particular work were derived from numerous

publications. The segmentation of tankers fleet is cited in Petter

Hvalgard Bakke and Daniel Reinsborg's master thesis "Empirical impacts

of macroeconomic risk factors on tanker shipping equities"(2012).

Bunker prices were retrieved from “Ship & Bunker.com” website, while

fuel consumption for tankers was picked from the scientific papers of

Wojciech Górski, Teresa Abramowicz-Gerigk and Zbigniew Burciu “The

influence of ship operational parameters on fuel consumption”(2013) as

well as S. B. Dalsøren, M. S. Eide, Ø. Endresen, A. Mjelde, G. Gravirand I.

and S. A. Isaksen “Update on emissions and environmental impacts from

the international fleet of ships: the contribution from major ship types

and ports” (2009) and also from Dr. R. Vis article “Viability of Scrubbers

for different types of Vessels” (2018) in Ship & Bunker.com. The cost of

scrubbers was retrieved from the article “SOx 2020: Effects on the Oil

Products Markets” in Clarkson.com website.

The equation that portraits the annual cost is:

45

Cf = Ct x D x Pf

Cf stands for the cost of fuel consumed by the ship in one year trip (280

sailing days), Ct is the daily consumption in tons, D is the 280 days

period, Pf is the fuel price per ton. After applying different Ct values for

five types of tankers and Pf values for four types of fuel the resulting

numbers for F can be shown in Table 1. Operational expenses are not

taken into account. Any loss of chartering revenues due to lack of space

after installing scrubbers or LNG tanks is also not estimated.

Ship type Handy

tanker Aframax Panamax VLCC ULCC

Ct/day 30 50 60 70 100

Scrubber cost

($ M) 3 4 5 5 5

Annual consumption Cf in $

PHFO (400$/ton) 3,360,000 5,600,000 6,720,000 7,840,000 11,200,000

PMGO (650 $/ton) 5,460,000 9,100,000 18,239,000 12,740,000 18,200,000

PLNG (600$/ton) 5,040,000 8,400,000 10,080,000 11,760,000 16,800,000

PULSFO (450$/ton) 3,780,000 6,300,000 7,560,000 8,820,000 12,600,000 Table 1. Annual (280 sailing days) fuel consumption in $ for five different types of tankers

4. Results

By the use of the same equation as for Table 1, a 24 month consumption

diagram for each of the five types of tankers is sketched and presented

below. The HFO fuel consumption line is drawn after calculating the cost

of a scrubber installation on these five types of vessels (according to

Table 1).

46

Figure 17. 24-month fuel consumption in $ for a Handy tanker

By examining Figure 17 it is obvious that the lines of consumptions of

different fuels, CHFO, CMGO and CLNG meet. These points show respective

ROI numbers in different month periods. The Return of Investment of a

scrubber with a 3 million $ cost installed on a Handy tanker, comparing

HFO and MGO bunker fuels is 13 months, while comparing HFO and LNG

is 17 months. For the ULFSO, ROI exceeds the 36 months.

47

Figure 18. 24-month fuel consumption for an Aframax tanker

Figure 18 shows that Return of Investment for a scrubber installation

with a cost of 4 million $ for an Aframax tanker, is 11 months compared

with the MGO, and 14 months when it comes to LNG use.

Figure 19. 24-month fuel consumption in $ for a Panamax tanker

48

Figure 19 shows that the investment of a scrubber installation that costs

5 million $ on a Panamax tanker will be returned in 11 months in HFO-

MGO fueling comparison. The same investment, in HFO-LNG relation will

be returned after 13 months. In HFO-ULSFO the payback period is 35

months.

Figure 20. 24-month fuel consumption in $ for a VLCC tanker

The Figure 20 shows that the Return of Investment for the installation of

a scrubber that costs 5 million dollars on a VLCC tanker will be paid out

in a 10 month period in HFO-MGO case. The respective payback period

for HFO-LNG is 11 months. For HFO-ULFSO it will be much longer,

reaching a 31 month period.

49

Figure 21. 24-month fuel consumption in $ for a ULCC tanker

In Figure 21, the Return of Investment of a scrubber that will cost 5

million dollars, will be achieved in 7 months when compared to the use

of MGO and 8 months if LNG is the shipping company’s choice. In the

HFO-ULSFO case, ROI drops to 27 months.

Thanks to this particular economic model and by examining its results

some useful conclusions can be reached. First of all, the Return of

Investment period for a scrubber installation on a smaller vessel (for

instance a Handy tanker) can be almost double compared with the much

larger ULCC (13 months compared with 7 months for the ULCC vessel).

And that applies to any case despite the fact that the scrubber

installation on an ULCC is almost 70% more expensive (3M $ to 5M $

accordingly). That could lead smaller ships’ owners to steer clear of

scrubbers and switch to ULSFO. On the contrary bigger vessels’ owners

could choose the option of installing scrubbers. Investment expenses in

that case won’t have any substantial effect on the company’s balance

sheet.

50

ROI when HFO-MGO are being compared, exceeds 12 months in the case

of a Handy tanker. In all other vessel types the funds invested return in

less than a year to the shipping company’s treasury.

In the case of HFO-ULSFO, ROI is triple in all ship types compared to

HFO-MGO. In Handy tanker it exceeds a 36 month period. Therefore

ship-owners of older ships should be more skeptical when it comes to

investing in scrubbers.

In every case, the ROI for HFO-LNG is greater than ROI for HFO-MGO, yet

the difference is just a few months (only one for VLCC and ULCC

respectively). Therefore ship owners will have no substantial benefit for

switching to LNG instead of MGO.

To make things simpler, owners of bigger vessels and new builds should

turn to scrubbers, while those who possess smaller or older vessels

should pick among other alternatives, such as MGO, LNG or ULSFO.

It is imperative to also point out some drawbacks that the economic

assessment model used in this thesis may present. This method was

applied exclusively on tanker ships, which represent only 10% of the

total world fleet. The estimation of fuel consumption did not take into

consideration any weather conditions, that might have an impact on a

real case. Future tendencies in bunker pricing also were not taken into

consideration. Retrofitting costs for switching to alternative fuels and, as

already mentioned, the operational expenses were not calculated.

Nevertheless, the method features the basic correlations between the

consumption costs for any alternative fuel and the ship’s size, projecting

ROI as a tool that ship-owners can use in their decision making process.

5. Conclusion

Compliance with IMO 2020 measures is a multifaceted subject that all

marine stakeholders confront. Many publications and studies agree that

shipping companies will need to pay significant amounts of money in

order to comply with the international regulations. These expenses will

51

either be registered as invested capitals or as operating costs, by the

shipping industry and by the infrastructure sector as well. According to

Wood Mackenzie consultancy “the shipping industry’s annual bunker

costs could rise by up to 60 billion dollars in 2020 with full compliance

with the IMO’s sulfur cap”(2017). Fuels can represent even the 70%-80%

of the total cost of a voyage. That is a fact that will lead to a significant

increase in the freight rates.

This thesis is dealing with the main issue of the sector, namely if EGCS

technology is the answer to IMO’s 2020 sulfur cap, or alternative fuels

such as MGO, LNG or ULSFO should be preferred. The objective is to

point out the most vital aspect of the question, the economic one, by

comparing all these options in a way that shows why any of these

methods should be chosen. This is accomplished by the enforcement of

a specific methodology. An economic model for measuring fuel

consumption of different vessel types was chosen. Return of Investment,

a principal economic factor for ship owners, helps in analyzing the

emerging results.

Analysis of these results leads to some basic deductions. Scrubbers are

less costly than switching to other fuels when installed on bigger ships

and new buildings. On the other hand ULSFO should be preferred in

smaller vessels. This also stands for older vessels which could use LNG as

well. The choice between MGO and LNG should take into account other

factors since both of them retain high prices. In their thesis, Georg

Fredriksson and Joel Wiberg (2018) are in concordance with this work

concluding that scrubbers are the best solution for new builds after 2020

and under certain circumstances for already sailing ships. Yet that stands

for bigger shipping companies with higher investment capability. On the

other hand, in their thesis, Fredrik Østerbø Brekke and Espen Græsdal

(2015) conclude that distillates are a preferable option for older vessels.

Initial investment costs for LNG or scrubbers exceed the running costs of

distillates on ships with short operating lifetime. In contrast to this

thesis’ results, they suggest that scrubbers are more suitable for medium

aged vessels while LNG applies only to vessels with a remaining lifetime

that is longer. Moreover, in their work, “IMO 0.5% S Global: Scrubbers

52

Yes or Scrubbers No?”, Ara Barsamian and Lee Curcio (2017) come to the

conclusion that for ships consuming more than 300t/day, scrubbers are

the most suitable compliant solution while vessels with less than 40t/day

consumption should switch to ULSFO or MGO. That leads to a scrubber

preference for larger ships and a fuel switch for smaller. It becomes

obvious their conclusions are in concordance with the bottom line

results of this thesis .

This work has certain limitations. The most important one is the inability

to examine all factors involved. Their number and complexity exceed a

thesis capability. The applied methodology concerned a specific domain

of shipping industry, and a number of assumptions have been adopted.

Thus, the derived conclusions are rather indicative, while fairly

significant. Nevertheless, this thesis can provide reference for further

research.

The implementation of measures on an international level is a multi-

variable problem. Researchers should address it accordingly. Since time

gap is closing, oncoming projects should be as integrated as possible.

Refinery and bunkering industry planning, should be also taken into

consideration. In that way stakeholders of the sector could be make

their decisions much easier.

It is quite obvious that at present there isn’t a single or simple answer to

the question that the shipping industry is facing regarding the air

pollution problem and the costs that will be generated by the new

international legislations. Yet, this uncertainty might have a positive

side. If all ship-owners adopt the same solution, for example ULSFO, or if

they all install scrubbers and keep using HFO, then the price of this fuel

would increase dramatically as demand would outstrip supply. If LNG

was to become the preferred solution, other problems might arise. The

current global liquefaction capacity is just 339 million MTs of LNG per

year. But “if all ships were to adopt LNG as a fuel source, liquefaction

capacity would need to expand 65%-90% to meet this new demand. This

capacity would take years to build and requires investments of hundreds

of billions of dollars” (Brown Brothers Harriman, 2018).

53

Ship-owners are not in a hurry to take action. They are waiting to see

which decision other ship owners will make. The main issue that

shipping companies have to deal with is the fact that nothing is clear yet.

But as the sector is running out of time, the decision- making process

should be quick and as accurate as possible. In the end the ship owners

must always bear in mind what Aristotle Onassis once said “We must

free ourselves of the hope that the sea will ever rest. We must learn to

sail in high winds”.

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